The MIR2118 family has undergone tremendous expansion in the grass lineage, where the miRNA targets numerous non-coding PHAS loci to produce 21-nt phased small-interfering RNAs (phasiRNAs) involved in male fertility. However, the evolutionary trajectory of the grass MIR2118 genes and the functions of phasiRNAs have not yet been fully elucidated. We conducted comparative genomic, molecular evolution, expression and Parallel Analysis of RNA Ends (PARE) analyses of MIR2118 and the miR2118-mediated regulatory pathway in grasses, focusing on Oryza sativa. Totally 617 MIR2118 and eight MIR1859 novel members were identified. Phylogenetic analyses showed that grass MIR2118 genes form a distinct clade from the MIR482/2118 genes of non-grass species. We reconstructed hypothetical evolutionary histories of the grass MIR2118 clusters and its MIR1859 variants, and examined the polycistronic composition and the differential expression of the osa-MIR2118 clusters. PARE data showed that osa-miR2118 might also direct the cleavage of some protein-coding gene transcripts. Importantly, we found that PARE analysis is inherently prone to false-positive target predictions when a large number of small RNAs, such as phasiRNAs, are analyzed. Our results reveal the evolution and diversification of the MIR2118 family, and provide new insights into the functions of phasiRNAs in the grasses.